Troubled towing and trailer equipment supplier Horizon Global Corp. entered into an agreement to sell its Asia-Pacific business unit to Australian private equity firm Pacific Equity Partners for $230.5 million.
The Troy-based company plans to use the proceeds of the sale, which is expected to be completed by the end of the third quarter, to pay down its debts.
The divestiture agreement comes after continued pressure from shareholders as the company has limped along for several years since its spin out from TriMas in 2015. The Peter Kross Trust demanded in November 2018 that the company explore a sale or merger of the company after several quarters of what the shareholder called “persistent gross underperformance.”
Horizon Global (NYSE: HZN) posted a net loss last year of $204 million on revenue of $850 million, down from a net loss of $3.6 million on revenue of $893 million in 2017. For the first six months of 2019, it reported a net loss of $33.2 million on revenue of $432.8 million.
Horizon Global’s Asia unit accounts for about 15 percent of its business, generating revenue of $30.6 million in the second quarter of 2019.
Before the deal announcement on Friday, Horizon Global shares had lost more than 85 percent of their value since hitting a high of $24 in late 2016. Shares were up nearly 24 percent in Friday morning trading at $3.65.
In April, Horizon Global took out a $51 million term loan to continue to meet customer obligations and the proceeds will be used to pay the debt back.
“We are pleased with the outcome of the sale process,” Carl Bizon, president and CEO, said in a press release. “While the proceeds from this sale will allow us to satisfy the $100 million prepayment obligation under our first lien term loan, we expect to make additional debt repayments substantially in excess of this amount. This transaction also simplifies our operating structure, allowing us to deepen our focus on our remaining operating segments, which we believe can be restored to historical profitability levels.”
Horizon Global’s problems stem from an overzealous European expansion plan and poor execution of consolidating six regional distribution centers into a newly built 512,000-square-foot facility in Kansas City, Mo. in 2017.
Horizon Global acquired German towing products manufacturer Westfalia-Automotive and its sister company Terwa in a $189 million deal in late 2016, but struggled to integrate the company into its operations and bled cash for several years because of it.
The company exited the second quarter of 2018 with $23 million in past due orders stemming from poor operations in Kansas City. Horizon Global has made improvements in Kansas City, but the plant ended 2018 with $6 million in past-due orders. It reported an operating loss of $29 million in the fourth quarter.
In response, the company initiated a cost-saving restructuring plan in March 2018, including reducing its U.S. salaried workforce by 30 percent by consolidating its Solon, Ohio, and Mosinee, Wis., offices into its Plymouth location and increasing production in low-cost locations like Mexico and Eastern Europe. It was expected to result in cost savings of $3 million to $5 million this year.
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